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REPORTS 


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THE EXECUTIVE COMMITTEE, 


MADE MARCH 9th, 18G8, 


THE PRESIDENT, 


.MADE APRIL 23d. 1808, 


T HE DIRE C T ORS 


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NEW YORK: 

PRESS OK THE ERIE RAILWAY COMPANY. 


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REPORTS 


THE EXECUTIVE COMMITTEE, 

MADE MARCH 9th, 1868, 

AMD 

THE PRESIDENT, 

MADE APRIL 23d, 1868, 


THE DIRECTORS 

OF THE 

ERIE RAILWAY COMPANY. 


NEW YORK : 

PRESS OF THE ERIE RAILWAY COMPANY 


1868 , 


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THE DIRECTORS 

OP THE 

ERIE RAILWAY COMPANY 

HEREWITH SUBMIT TO THE STOCKHOLDERS 

THE 

REPORT OF THE EXECUTIVE COMMITTEE, 

MADE TO THE BOARD THIS DAY. 


The Executive Committee beg to submit to the 
Board of Directors a separate Report of their 
doings under the powers conferred upon them by 
the Board, on the 19th day of February last, by 
the following vote : 

“ It being necessary for the finishing, completing and 
operating the road of the company, to borrow money, 

Resolved , That under the provisions of the statute author- 
izing the loan of money for such purposes, the Executive 
Committee be authorized to borrow such sum as may be 
necessary, and to issue therefor such security as is provided 
for in such cases by the laws of this State, and that the 
President and Secretary be authorized, under the seal of 
the Company, to execute all needful and proper agreements 
and undertakings for such purpose.” 

Early in the winter the President called the attention of 
the committee to the condition of the road and to the 
probable wants of the company during the coming summer. 
At several sessions of the committee the subject was in- 
formally considered, and it was discussed, as well between 
the members of the committee as with Mr. Riddle and the 
Vice-President, and it was substantially agreed to by all, 


4 


that the best interests of the company called upon us, so 
far as we might he able to do so, to replace iron with steel 
rails whenever renewals were made, and to double track the 
Delaware Division also with steel rails. It was also sup- 
posed that the new storehouses now being constructed for 
the Central and Hudson River Railroads, in St. John's 
Park, would give them such an advantage over us in the 
transportation from storehouses of heavy freight destined 
for competing points in the West, that we should be forced 
to construct equally good accommodations at Long Dock. 
Several private parties were in negotiation with us for the 
privilege of erecting such storehouses, as well as of erect- 
ing grain storehouses and elevators, but w T e thought it the 
best policy for the Company to own the buildings if possible. 
The Superintendent had also informed us that new equip- 
ment was needed for the increasing business of the company, 
and w T e had informally determined that when these things 
should so take shape that we could make a definite report 
thereon to the board, we would advise that the necessary 
capital be raised by the sale of the convertible bonds of the 
company, under the powers conferred upon the company 
by the General Railroad Law. Of the power to issue such 
bonds, and of the right to comply with the terms of such a 
contract by authorizing the conversion of such a bond into 
stock, we did not entertain a doubt. Our predecessors had 
claimed and exercised the right of increasing the capital 
stock of the company by conversion of bonds as early as 
1863, and had reported the same to the Legislature, and 
had continued to exercise the right and to report their ac- 
tion to the Legislature without criticism. The New York 
Central Railroad Company had exercised the same right 
also to the amount of over $3,000,000, and had from time to 
time reported their doings to the Legislature without criti- 
cism, and the holders of the stock created by such conver- 
sions in each company had exercised their right of voting, as 
stockholders, without challenge. The same may be said of 
the Hudson River Railroad Company, and of most of the 


5 


railroad companies in this State. The construction of the 
law was universal in favor of the right to issue convertible 
bonds, and to convert those bonds into stock if called upon, 
even though the amount of capital stock should be increased 
thereby beyond the amount named in the charter, and it 
never entered into our heads to doubt a right so universally 
claimed and exercised. 

While we were maturing these schemes for increasing 
the efficiency of your road and its equipment, we were also, 
under the authority conferred upon us by you, negotiating 
for the extension of its business connections, go as to reap 
the full advantage of the new capital to be put in the prop- 
erty. We contracted with the Michigan Southern and 
Northern Indiana Eailroad Company to have them put down 
a third rail on their road so soon as other parties should take 
the broad gauge to Toledo. It is needless for us to point out 
to you the immense value of this connection to the Erie 
Railway Company. We also consented to the deposit of 
the bonds of the Boston, Hartford and Erie Railroad Com- 
pany, issued under the agreement between that company 
and this company, as collateral with several parties who 
loaned their property to aid in the construction of that 
valuable connection And just as we had so far completed 
these several important matters as to be ready to report 
them to you, we received reliable information that an attack 
in the Courts was immediately to be made upon the Erie 
Railway Company in the interest of the New York Central 
Railroad Company, to restrain us from extending our con- 
nections and to localize our road — in fact to destroy its value 
as a competitor with that powerful company. The first blow 
struck was a suit discrediting this company, by charging a 
former board as having been in collusion with Mr. Drew in 
certain alleged frauds in his contracts with the company, 
and the present board as guilty in permitting the conver- 
sion of the stock of the Buffalo, Bradford and Pittsburgh 
Railroad Company. The second blow followed soon after 
in the summary removal of Mr. Drew from his office as di~ 


6 


rector, and a prayer for his removal from his office as treas* 
urer. One of these suits was in the name of Mr. F rank 
Work, then a director in this board, and the other was in- 
stigated by him, notwithstanding the fact that he voted to 
make Mr. Drew a director and the treasurer of this com- 
pany, with a full knowledge of all the facts which he charges 
to be fraudulent, and the further fact that he voted for the 
conversion of all the leases of the company, including the 
Buffalo, Bradford and Pittsburgh road. The motive for this 
otherwise unaccountable change of front on Mr. Work's 
part is to be found in the well-known fact that he was put 
into this board in the interest of the Hudson Biver and 
Central Bailroads ; and that when we refused to become 
parties to the schemes of Mr. Vanderbilt and his friends to 
create a gigantic monopoly for the benefit of the Central 
line, Mr. Work's interests were exposed. 

It was under these circumstances that you gave us au- 
thority to issue and sell convertible bonds for the purpose 
of completing, finishing and operating our road ; and al- 
though, owing to the hostile presence of Mr. Work, we 
could not discuss this matter as freely as we would have 
wished, yet you reposed a generous confidence in us, and, 
we believe, anticipated in advance what our course would 
be. 

There was but one course open to us as prudent men, 
charged with the protection of the interests of the Erie 
Bailway Company as distinguished from those of rival lines : 
namely — to secure, before it was too late, the means to meet 
the necessary expenditures we have alluded to ; and, after full 
discussion of the matter, we authorized the creation, issue 
and sale of ten millions of dollars of convertible bonds, the 
entire proceeds of which would not be more than enough for 
the contemplated improvements. 

Notwithstanding the unwarranted attacks upon us we 
took no steps to defend ourselves. We continued our ne- 
gotiations with the New York Central, Hudson Biver and 
Harlem Companies for the consolidation of rates. Some of 


7 


us were slow to believe that they could be implicated in 
such proceedings ; and all of us thought that we ought to 
continue to maintain amicable relations with them so long 
as we could do so without a sacrifice of our self-respect. 
The next of these suits, however, made it our imperative 
duty to take steps to protect the Erie Railway Company : 
for we were now enjoined — and still at the suit of Mr. 
Work — from carrying out our agreement to convert our 
convertible bonds into stock. When you remember that 
independently of the ten millions of bonds which we autho- 
rized as above to be issued and sold, there are outstanding 
some nine millions more of bonds which are convertible into 
the common stock of the company, you will see how dis- 
astrous it may be to our credit to have a court assume to 
compel us to repudiate our contracts. We were further 
enjoined from making certain transfers of stock — from car- 
rying out our contracts with the Michigan Southern Com- 
pany, and with the Boston, Hartford and Erie Company ; 
and the injunction further contained the usual shots against 
Mr. Drew. There was no mistaking the purpose of this 
suit. It meant destruction to the credit of the Erie Rail- 
way Company, the localization of its traffic, the severance 
of its terminal connections, denial of the means necessary 
to give it a proper, suitable or safe equipment, its prostra- 
tion to the interests of the New York Central Railroad 
Company, and its final administration in their interest — 
and all this was done at the instigation of one of our own 
directors. We accepted the issue and authorized the com- 
mencement of a suit, in which Mr. Work is enjoined from 
serving as a director in this board, and from proceeding 
with his suits. Copies of these proceedings will be fur- 
nished to each director, and we hope you will carefully read 
them. 

The Senate has taken this matter up, and a committee 
has been appointed to examine into the condition of the 
company, and into the charges made against it in the news- 
papers and in the Supreme Court, and the hearing is to 


s 


commence on the 10th inst. To this tribunal we confi- 
dently appeal. If it he true that in converting three mil- 
lions of dollars of bonded debt, and in contracting to con- 
vert nine millions more (irrespective of our late proceed- 
ings) the Erie Railway Company has exceeded its corporate 
powers, it is equally true that the New York Central 
Railroad Company has exceeded its powers in converting 
$3,200,000 of its bonded debt. And it is in the power of 
the Legislature to afford both companies by ratifying acts 
the fullest protection. And, on the other hand, if it be true, 
as we believe it to be, that the Legislature intended to con- 
fer upon railroad companies the wise, just and most rea- 
sonable power of shifting its debt into capital stock when- 
ever it can be done, and if, in consequence of the exercise 
of that power in good faith and in the best interests of this 
company, speculators and rival lines have assailed us and 
cast a cloud upon our issues of stock, we feel ourselves 
equally justified in asking the Legislature to remove that 
cloud : and the summons to go to Albany has only antici- 
pated by a few days our request for a hearing and for a 
remedy to allay the doubts and disquietudes of those who 
hold the stock of this company. 

It only remains to state the wants of the company, to 
meet which the late issue of Bonds was made. More de- 
tailed statements thereof are to be found in the reports of 
the General Superintendent herewith submitted. 

STATEMENT. 


17,000 tons of new iron, at $75, $1,275,000 

8,000 “ “ steel rails, at $ 1 45, 1.160.000 

50 locomotives, at $15.000, 750.000 

300 box cars, at $800, 240.000 

200 box cattle cars, at $900, 180.000 

1 00 coal dumps, at $625, 62.500 

200 “ 11 (for bituminous coal,) 125.000 

Double track on Delaware Division, 2.790.000 


Carried forward, $6,582,500 


9 


Brought forward, $6,582,500 

Passenger stations at Long Dock, Buffalo and Ro- 
chester,.. __ 400.000 

Store-houses for teas, sugar, grain, cotton, &c., at 

Long Dock, 1 .000.000 

Elevator at Long Dock, 300.000 

u “ Buffalo, • 150.000 

New depot lands and river front at Newburgh, 225.000 

Ferry slips at Twenty-third Street, 25.000 

New ferry boat for Twenty-third Street service,. . 75.000 


Ail of which is respectfully submitted. 
New York, March 9, 1868, 


$8,757,500 


JOHN S. ELDRIDGE, 

President. 


RESOLUTIONS OF BOARD AT MEETING ABOVE HELD. 

Resolved , That the report of the Executive Committee just read be ap- 
proved, and their acts therein set forth be confirmed so far as they need 
confirmation and so far as this Board may legally and lawfully confirm 
the same. 

Resolved , That the President be instructed to carry out on behalf of 
this Board the policy which the Executive Committee have inaugurated, 
to wit : that he be directed to purchase 17,000 tons of iron rails (or con- 
tract for re-rolling a part of the same) and 8,000 tons of steel rails ; that 
he be directed to cause to be constructed for the road the number of 
locomotives and cars recommended by the General Superintendent and 
the Committee ; that he be directed to proceed at once with the double 
tracking the Delaware Division ; that lie cause plans to be made and 
submitted to this Board for a new passenger station and for storehouses 
and an elevator at Jersey City; also plans for new depots at Buffalo and 
Rochester ; that he take steps for the construction of a new ferry boat 
and for slips at the foot of 23d- Street, and for the opening of the 23d 
Street ferry as soon as the river is free from ice, and that he report to 
this Board the cost of the proposed new accommodations at Newburgh, 
with a plan of the same. 

Resolved , That it is and always has been, and as long as the present 
administration remains in power it will continue to be the policy of the 
Erie Railway Company, to afford to the public on the line of our road 
and at its termini, ample accommodations for the transportation of pas- 
sengers and freight, at the lowest rates that are consistent with the 
return of a proper remuneration upon the capital invested in the Erie 
Railway, its branches and ferries, and that we are opposed to any mono- 
poly — that it is the true interest of the Sterling Bondholders, of the 
Preferred Stockholders and of the Common Stockholders, to join in re- 
sisting the suits referred to in the report of the Executive Committee. 

Resolved , That the President be fully authorized to carry out the views 
of the Board as expressed in these resolutions. 

2 


10 


Office General Superintendent, 

New York, March 3, 1868. 


Hon. John S. Eldridge. 

President Erie Railway : 

Sir: — On the 3rd of December 1 addressed a communication to the 
Vice-President recommending the purchase of '5,000 tons of steel rails, 
and at an interview with you, I expressed the opinion that 15,000 to 
18,000 tons of rails would be required for the repairs of track during the 
year 1868. 

Since that opinion was given, we have passed through three months 
of unusually severe winter weather and moved more than an average 
winter tonnage, with the road-bed frozen solid as a rock, the rails en- 
cased in snow and ice, so that it has been impossible to do much in 
the way of repairs ; the iron rails have broken, laminated and worn out 
beyond all precedent, until there is scarce a mile of your road, except 
that laid with steel rails, between Jersey City and Salamanca or Buf- 
falo, where it is safe to run a train at the ordinary passenger-train 
speed, and many portions of the road can only be traversed safely by 
reducing the speed of all trains to 12 or 15 miles per hour, solely on ac- 
count of the worn out and rotten condition of the rails. Broken 
wheels, axles, engines and trains off the track, have been of daily, al- 
most hourly occurrence for the last two months, caused mostly by de- 
fective rails. Fully one thousand broken rails were taken from the track 
in the month of January, while the number removed on account of 
lamination, crushing, or wearing out was much greater. February will 
show a still worse record than January. 

The failure of rails is confined to no particular make, although there 
is a difference, easily observed, between those made at Scranton and 
those re-rolled at Elmira. The former break readily into many pieces, 
and by so doing are pretty sure to throw a train from the track; a large 
number of these rails have broken with less than six months’ service, 
some with scarce one month’s wear. 

The Elmira re-rolled iron seldom breaks until very much worn, but 
it does not possess the hardness and durability found in the Scranton 
iron, when the latter has strength to resist breaking strains. 

With the ten miles of track laid with the John Brown Bessemer Steel, 
no fault need be found. But one rail lias broken during the winter, and 
no lamination, and very little wear is perceptible. Twenty steel rails 
„ were laid in Jersey City yard last March, the iron rails adjoining subject 
to the same wear, have been renewed four times since the steel was put 
down, and I have no doubt the steel rails will outlast three times as 
many more iron rails. 

This winter’s experience has satisfied me that the quality and weight 
of the iron rails in use cannot be depended upon to sustain the traffic of 
the Erie Railway. Forty-two ton Locomotives hauling trains of fifty 
and sixty loaded cars, and passenger engines weighing thirty-seven tons, 
running at a speed of thirty to forty miles per hour, literally crush and 
grind out the iron rails beneath them. Instances have been reported to 
me of rails removed from track too much worn for safety, where the 
first imperfection was visible but the day before. 

In view of this state of things what is the remedy 1 Manifestly the 
adoption of steel rails as far as practicable, and iron rails of superior 
quality and heavier section, to be followed by the gradual reduction of 
the weight of engines and cars as new equipment becomes necessary. 
The tendency of late years has been to larger and more powerful loco- 
motives, and heavier, stronger cars, and this has been carried to such 
an extent as to render them out of all proportion to the strength and 
durability of track. Especially has this been the fact upon the Erie 
Railway. 


li 


The condition of the iron at the present date is such as to give me 
much anxiety and apprehension for the safety of trains. We cannot and 
do not attempt to make the schedule time with our trains, nearly all 
lose from two to five hours in passing over the road, and it has been 
only by the exercise of extreme caution we have been able thus far to 
escape serious accident. 

A very large quantity of rails must be laid as soon as the weather 
will permit and they can be furnished. 

In conclusion I desire to modify my estimate of the quantity of rails 
required for the current year. After a careful observation of the whole 
road, assisted by information obtained from Division Superintendents 
and Track Masters, I have come to the conclusion that twenty -five thou- 
sand tons of rails will be needed to keep up your track in 1868, and I 
would earnestly recommend that as large a proportion as possible shall 
be of steel. 

Very respectfully your obedient servant, 

H. RIDDLE, 

General Sup't. 


Hon. J. S. 


Office General Superintendent, 

New York, March 3, 1868. 

Eldridge, 

President Erie Railway Co. : 


Sir: — A careful review of the present condition of the Motive Power 
of the Erie Railway Company enables me to present the following state- 
ment for your consideration : 

The company own 371 locomotives— of this number about 30 are con- 
demned as entirely useless, and some 40 more are of but little value, 
owing to their long service and general infirmity, being considered un- 
safe to cany even moderate steam pressure, and sure to break down if* 
run long distances. 220 engines have performed over ten years service, 
and 143 of that number over 15 years service. The master mechanics 
report 128 of these locomotives as requiring new boilers, and recommend 
the complete reconstruction of 107 of the number whenever the boilers 
shall be renewed, or in other words, instead of giving the old engine a 
new boiler, it is deemed more to the interest of the company to construct 
a complete new engine, for the following reasons : most of these engines 
are of the kind known as half-crank engines, an expensive and trouble- 
some class to keep in repair. The engines having been so long in service 
no dependence can be placed upon the strength and durability of any of 
their parts — they are of a great variety of patterns, and make it neces- 
sary to keep a very large stock of material on hand to provide against 
breakages, there being something over sixty different kinds of engines 
on the Erie road. 

It will be seen by the foregoing that the company have only 300 ser- 
viceable engines, considerably less than that of really efficient ones. 
From 15 to 25 per cent, are in shops undergoing repairs, ordinarily, at 
this season often a larger proportion. Our mechanics estimate the life 
of an engine at 15 years. Assuming that to be true, we should build 20 
every year to keep our 300 good, to say nothing of the 70 now idle and 
worthless ; but as we have added by purchase and construction only 12 
new engines to our stock during the last two years, we are at the pre- 
sent moment some 28 engines short of what we should have to make 
good the depreciation. In view therefore of the certain increase of the 
coal tonnage, and probable increase of both through and way traffic, I 
feel justified in saying there should be 50 new locomotives added to the 
equipment of the road during the next 12 months. In the company’s 
shops at Susquehanna and Dunkirk, if worked to their capacity, with a 


12 


slight increase of machinery, it is estimated 30 engines per annum can 
be built — at present we are working only force sufficient to build about 
one-third that number. The engines built in the company’s shops, in 
point of strength, durability and perfection of workmanship far excel 
those procured from locomotive builders, and while their cost may fully 
equal, perhaps exceed the price for which similar engines may be con- 
tracted for, I yet deem it good policy to fully employ our own facilities 
for the construction of engines. 

To fill out the number 1 have ventured to suggest as needed, 20 will 
be required outside of the company’s ability to construct. These 1 
would contract for to be built after specifications and plans to be fur- 
nished by the company’s officers, and under the inspection of a good 
mechanic to be selected and paid by the Railway company. In this 
way I think we could obtain satisfactory machines. 

1 also deem it my duty to recommend an increase of Freight and Coal 
cars. Say 300 Box Freight cars and 100 Coal cars in addition to those 
heretofore ordered. 

The Coal cars are sure to be needed, and the Box Freight cars un- 
less the freight traffic should fall off contrary to all expectations.. 

Respectfully your obedient Servant, 

H. RIDDLE, 

General Sup't. 


P. S. — Since writing the foregoing report, I have learned from Gen’l 
Potter that he is desirous of establishing stock yards at Urbana and 
Cincinnati, on the line of the Atlantic and Great Western Railway, and 
taking stock for the New York market that has hitherto gone via Pitts- 
burgh, provided the Erie will furnish her full proportion of stock cars. 
This we cannot do without adding say 200 stock cars to our present 
number, and to meet this and other demands I would respectfully sub- 
mit the following estimate for new cars : — 


300 Box Cars, 

200 Box Cattle Cars, 
100 Coal Dumps, 


at $800 $240,000 

“ 900 180,000 

“ 625 62,500 


$482,500 


REPORT 

OF THE PRESIDENT, 

APRIL 23, 1868. 


At a meeting of the Board of Directors of the Erie Rail- 
way Company, held at the office of the Company, April 23, 
1868, the following Report from the President was sub- 
mitted to the Board, and was ordered to be laid upon the 
table and printed. 

H. N. OTIS, 

Secretary . 


To the Board of Directors 

of the Erie Railway Company : 

In the report of the Executive Committee to the Board 
on the 9th of March last, they informed the Board, that 
they had, under the powers conferred upon them on the 19th 
of February last, authorized the Convertible Bonds of the 
Company to the amount of $10,000,000 to be issued and 
sold. Five million of dollars of these bonds were sold on 
the 19th day of February last. Very soon after the receipt 
by the Treasurer of our Company of the money for these 
bonds they were converted into the Common Stock of the 
Company. Feeling assured that our best interests required 
the sale of the additional $5,000,000 which had been au- 
thorised, the sale of this additional amount was completed 
on the 3rd day of March last. These bonds all have real- 
ised the sum of $7,250,000. 

It was the object in creating this fund, to cause it to be 
speedily expended upon the road in the manner pointed out 


14 


in the report of March 9th. The good faith of that report 
having been attacked, I feel it due to the Executive Com- 
mittee and to the Board, to reiterate, that long before the 
sales were made, the Executive Committee and other offi- 
cers of the Company and members of the Board -had con- 
templated the necessity of such expenditures, unless we pro- 
posed to abandon competition for traffic at points where we 
had rivals. 

As the range of enquiries in the various proceedings on 
behalf of and against the Company involves transactions of 
some years standing, I deem it proper to myself and others 
to say, that a majority of the present Board and of its Ex- 
ecutive Committee were connected with the Erie Bailway 
for the first time on the eighth day of October last. To 
the merits and successes of former administrations such 
members could lay no claim : if there were demerits and 
failures in such administrations they were not justly charge- 
able with them. Strangers to details, the new members 
were first occupied in learning the routine of business and 
the general working of the administrative machinery of the 
corporation. Considering that there are nearly ten thou- 
sand names on the Company's pay rolls, and that the 
monthly expenditures for operating expenses are about 
$900,000, it will be conceded that we had work to occupy 
us in mastering these details. Before this was accom- 
plished, we saw that to enable the Erie Bailway to com- 
pete on even terms with its rivals, common business pru- 
dence required large outlays for construction on the line 
of the road and at its New York terminus. The Dela- 
ware Division is, as has been well said, the narrow neck of 
the bottle, through which the whole stream of traffic must 
flow. This, we were clear, ought to be double tracked with 
steel rails. The average life of an iron rail on the road is 
about four years. The average life of a steel rail is known 
to be at least five times as great ; and as the difference in 
cost is rather less than two to one, it was plain that econ- 
omy demanded that renewals should be in steel, so far as 


15 


the limited manufacture of that article would permit. It 
was also clear that the other outlays recommended in the 
report of March 9th must he made soon, if we intended 
that the Erie should remain a first class road. 

I confidently invite the scrutiny of the Stockholders to 
the judiciousness and economy of all these proposed outlays, 
and I challenge any well informed railroad man to show 
that they are not essential to the prosperity of the Erie 
Railway, and that a prudent economy does not demand that 
they shall he made as soon as possible. 

Accompanying the report of March 9th was a report of 
Mr. Riddle, showing the calamitous effect of the winter 
upon our track. Mr. Riddle was, before his appointment 
as General Superintendent, the Division Superintendent on 
the Delaware Division for many years, and no officer in 
the Company's employ is so familiar with that division as 
he is. His report, though entitled from his high personal 
character and his long experience to great weight, was 
made the subject of bitter, and at times, vindictive com- 
ment. It is due to him that I should reiterate my convic- 
tions that it was entirely correct at that time ; and I may 
further say that I have also good reason to believe that the 
condition of many other roads was the same as that of our 
road at that time. 

At the meeting on the 9tli March you gave the President 
power to apply the funds realized by the sale of the Con- 
vertible Bonds to the objects asked for in the report of the 
Executive Committee, and you adjourned in the confident 
expectation that before the next meeting steel rails would 
be gradually taking the place of iron on the track, that 
the work would be forwarded upon doubling the capacity 
of the Delaware neck, and that the plans for storehouses 
and elevators which had been so long in the pigeon holes 
of the Executive Committee, would be in the hands of 
practical mechanics for estimates. 

These hopes were destined to disappointment. On the 
afternoon of the very day in which our last report was 


16 


made, or on the next day, I cannot say from memory which, 
two injunctions were served upon the Company identical in 
form, emanating from two separate judges, restraining us 
from holding meetings of the Board or of the Executive 
Committee, also restraining us from further issues of Con- 
vertible Bonds, from converting any Convertible Bonds al- 
ready issued, from increasing the amount of the Capital 
Stock, from leasing any new roads, and from capitalizing 
any existing leases by exchange of stock. 

We have secured the right to hold meetings of the Board, 
and of the Executive Committee : hut we are still shut out 
from the exercise of the other rights conferred upon us by 
the statutes of the State of New York, which we conceive 
to have been unjustly taken from us. In the Appendix A, 
hereto attached, you will find the statutes of this State 
under which the Erie Kailway Company derives the power 
to issue Convertible Bonds and to convert those bonds into 
stock. The New York Central Railroad Company and the 
Hudson River Railroad Company have each repeatedly 
acted upon the same construction of these laws that we 
have adopted, and I have no doubt that they and their 
officers agree with us in our construction. The power has 
never been seriously questioned until it became the interest 
of Wall Street speculators to question it. I hope, there- 
fore, that we shall confidently insist, when the time comes 
for presenting our case to the Hon. Justices who have 
granted these injunctions, that justice and law both alike 
require that our rights in these respects, conferred upon us 
by the laws of New York, and by the Stockholders vested 
in you, shall be restored. 

As to the restraint upon leases, and the conversion of the 
stock of leased roads, I submit herewith, in Appendix B, 
the statutes under which the power to make such conver- 
sions is vested in the Company, and I shall direct our coun- 
sel at a proper time to ask to have this injunction modi- 
fied, so as to permit us to exercise what we conceive to be 
undoubted rights under the statute. And if we can secure 


17 


a reduction of the rentals by a proportionate increase of 
stock, we feel confident that every Stockholder not interested 
in stock speculations, will say that we have done right. 

On the day of the last meeting of the Board, directly 
after the adjournment, an inquiry into the affairs of the com- 
pany was begun before a committee of the Senate of New 
York. This inquiry was conducted partly in New York 
and partly at Albany. The Erie Railway and the New 
York Central Railroad Companies were each represented at 
it by counsel, and several witnesses were examined, some ofi 
them at great length. The inquiry extended over the whole 
of the late administration as well my own. As the whole of 
this testimony has been printed in pamphlet form I do not 
think it worth while to burden this report with it. Two 
reports were submitted to the Senate with the testimony — 
the one condemning our action in issuing the $10,000,000 
Convertible Bonds — the other justifying it. The Senate 
by a decided majority rejected the condemnatory resolutions 
reported with the first report, and have passed an act which 
has also passed the Assembly, and has been approved by 
the Governor, a copy of which is herewith submitted marked 
C, which is regarded by our counsel as substantially the 
same in principle as the one recommended on the report 
which justified our action. 

Simultaneously with the investigation at Albany, pro- 
ceedings against several members of the Board were com- 
menced in New York for alleged contempt of court, and 
these have furnished the counsel on both sides with the 
opportunity to make extensive investigations into a variety 
of matters. 

About the same time also steps were taken to have an 
adverse Receiver appointed to hold the funds realized from 
the sale of the Convertible Bonds. An appeal from the 
order granting the motion has been argued at the General 
Term of the Supreme Court in New York, and we are now 
awaiting the decision. In consequence of these several 
proceedings, we have not thought it prudent to use the 
3 


18 


fund arising from the sale of the disputed issue. I deeply 
deplore the necessity which has arrested this money in the 
Treasury when it is so much wanted on the road. 

It is my painful duty to report to you that the most dis- 
astrous and most afflicting accident that has ever happened 
on our road has just occurred on the Delaware Division. 
The details, as far as known to me, will be found in the 
letter of Mr. Riddle, herewith submitted in Appendix D. 
An accident, accompanied with so much loss of life and 
suffering, all caused by the breaking of an iron rail on the 
part of our road most crowded by trains by reason of there 
being but a single track, painfully reminds us that we cannot 
hasten too soon the completion of the double track of that 
division with steel rails. It gives me pleasure to be able to 
state that the officers and agents of the road and the people 
of Port Jervis have been unremitting in their care for the 
sufferers, and that everything that skill and sympathy 
could do has been done for them. 

In closing this report, I beg particularly to call the at- 
tention of the Board to the fact that the Company is now 
possessed of a large fund, which the Legislature has directed 
them to use in constructing, furnishing, and operating their 
road, and in no other way. The judicious and speedy ex- 
penditure of this fund in the manner pointed out by the 
report of the 9th March, is undoubtedly called for by the 
best interests of the Erie Railway Company. And when 
the storms of the present dispute are blown over, I have no 
doubt that all will agree, that the financial step, which got 
for the Erie Railway over seven millions of dollars to be 
expended in double tracks, steel rails, equipment, and pro- 
per termini, without increasing the absolute charges upon 
its revenues, was not only wisely taken, but has produced 
results of which every gentleman who sanctioned it may be 
proud. 

JOHN S. ELDRIDGE, 

Pres't, 


New York, April 23d, 1868, 


19 


APPENDIX A. 

Extract from “ An Act to authorize the tormation of rail- 
road corporations, and to regulate the same,” passed 
April 2, 1850. 

Sec. 28. Every corporation formed under this Act, shall, 
in addition to the powers conferred on corporations in the 
third title of the eighteenth chapter of the Revised Stat- 
utes, have power 

# ft ft ft ft # ft ft ft 

ft ft ft ft ft ft ft ft ft 

10. From time to time to borrow such sums of money 
as may be necessary for completing and finishing or oper- 
ating their railroad, and to issue and dispose of their bonds, 
for any amount so borrowed, and to mortgage their corpo- 
rate property and franchises to secure the payment of any 
debt contracted by the company for the purposes aforesaid, 
and the directors of the company may confer on any holder 
of any bond issued for money borrowed as aforesaid, the 
right to convert the principal due or owing thereon into 
stock of said company, at any time not exceeding ten years 
from the date of the bond, under such regulations as the 
directors may see fit to adopt. 

ft ft ft ft ft ft ft ft ft 

ft ft ft ft ft ft ft ft ft 

Sec. 49. All existing railroad corporations within this 
state shall respectively have and possess all the powers and 
privileges contained in this act ; and they shall be subject 
to all the duties, liabilities and provisions not inconsistent 
with the provisions of their charter, contained in sections 
nine, thirteen, fourteen, fifteen, sixteen, seventeen, eighteen, 
nineteen, twenty, twenty-one, twenty- three, twenty four, 
twenty-five, twenty-six, twenty-seven, twenty-eight (except 
subdivision nine), thirty, thirty-one, thirty-two, thirty-three, 
thirty-four, thirty-five, thirty-six, thirty-seven, thirty-eight, 
thirty-nine, forty, forty-one, forty- two, forty- three, forty- 
four, forty-five, forty-six, of this act. 


20 


APPENDIX B. 

Chapter 254. Laws of 1867. 

AN ACT in relation to railroads held under lease. 

Passed April 3, 1867, three-fifths being present. 

Sec. 1. Any railroad corporation created by the laws of 
this State, or its successors, now being the lessee of the road 
of any other railroad corporation, may take a surrender or 
transfer of the capital stock of the stockholders or any of 
them in the corporation whose road is held under lease, and 
issue in exchange therefor the like additional amount of its 
own capital stock at par or on such other terms and condi- 
tions as may be agreed upon between the two corporations; 
and whenever the greater part of the capital stock of any 
such corporation shall have been so surrendered or transfer- 
red, the directors of the corporation taking such surrender 
or transfer, shall thereafter, on a resolution electing so to do, 
to be entered on their minutes, become ex-officio the direct- 
ors of the corporation whose road is so held under lease, and 
shall manage and conduct the affairs thereof as provided by 
law ; and whenever the whole of the said capital stock shall 
have been so surrendered or transferred, and a certificate 
thereof filed in the office of the Secretary of State, under the 
common seal of the corporation to whom such surrender or 
transfer shall have been made, the estate, property, rights, 
privileges and franchises of the said corporation whose stock 
shall have been so surrendered or transferred, shall there- 
upon vest in and be held and enjoyed by the said corporation 
to whom such surrender or transfer shall have been made, 
as fully and entirely, and without charge or diminution, as 
the same were before held and enjoyed, and be managed 
and controlled by the board of directors of the said corpora- 
tion to whom such surrender or transfer of the said stock 
shall have been made, and in the corporate name of such 
corporation. The rights of any stockholder not so surren- 
dering or transferring his stock, shall not be in any way af- 
fected hereby, nor shall existing liabilities or the rights of 
creditors of the corporation, where stock shall have been so 
surrendered or transferred, be in any way affected or im- 
paired by this act. 

Sec. 2. This act shall take effect immediately. 


21 


APPENDIX C. 

Chapter 278. Laws of 1868. 

AN ACT 

In relation to the Erie, New York Central, Hudson 
River and Harlem Railway Companies. 

Passed April 21, 1868. 

The People of the State of New York , represented in Senate 
and Assembly , do enact as follows : 

Section 1. It shall be lawful for the Erie Railway Com- 
pany to use the money realized from the convertible bonds 
issued by said Company on the 19th day of February, and 
on the 3d day of March, 1868, (the said bonds amounting, in 
all, to ten millions of dollars), for the purpose of completing, 
furnishing and operating its railroad, and for no other pur- 
pose. Nothing in this section contained shall affect any 
right of action of any person against any officer or agent of 
the Erie Railway Company, nor shall it affect any action 
or proceeding now pending, save as herein expressly pro- 
vided ; nor shall anything therein contained be held or con- 
strued to affect any liability, civil or criminal, of any officer 
or agent of the said Erie Railway Company, or of any other 
person. The use of the moneys, in this section mentioned, 
by any officer or agent of said Railway Company, for any 
other purpose than as is herein mentioned, shall be a felony 
punishable upon conviction thereof, by imprisonment in the 
state prison for not less than two nor more than five years. 

Sec. 2. The future guarantying by the Erie Railway 
Company of the bonds or coupons of any other railroad 
corporation necessary and proper to secure a connection of 
said Erie Railway with other railroads so as to form a con- 
tinuous line of communication between New York and 
Chicago, for the purpose of securing better facilities for the 
traffic of said Erie Railway Company, and contracts here- 
after made for that purpose shall be deemed and taken to 
be within the powers of said Erie Railway Company. 

Sec. 3. No stockholder, director or officer in either the 
New York Central Railroad Company, the Hudson River 
Railroad Company, or the Harlem Railroad Company shall 
be a director or officer of the Erie Railway Company ; and 
no stockholder, director or officer of the latter company 


22 

shall be a director or officer of either of the three first named 
companies. 

Sec. 4. It shall not be lawful for the Erie Railway Com- 
pany to consolidate its stock, or any part thereof, or to divide 
its earnings, or any part thereof, with the New York Cen- 
tral Railroad Company, or with the Hudson River or Har- 
lem Railroad Companies, and any contract made between the 
Erie Railway Company and either of the above companies for 
such consolidation or division shall be void ; nor shall any 
stockholder, director, officer, or agent of the Hudson River, 
Harlem, or New York Central Railroad Company enter 
into any agreement with any stockholder, director, officer, 
or agent of the Erie Railway Company, to fix the price for 
carrying freight or passengers through, or to, or from any 
point in this state ; any stockholder, director, officer, agent, 
or other person authorized, making or consenting to such 
an agreement, shall be deemed guilty of a misdemeanor, 
and upon conviction thereof shall be punished by fine or 
imprisonment or both in the discretion of the court. 

Sec. 5. This act shall take effect immediately. 

State of New York , \ 

Office of the Secretary of State, j 

I have compared the preceding with the original law on 
file in this office, and do hereby certify that the same is a 
correct transcript therefrom, and of the whole of said original 
law. 

Given under my hand and seal of office, at the 
City of Albany, this twenty- second day of 
[ L. s. ] April, in the year one thousand eight hun- 
dred and sixty-eight. 

D. WILLERS, Jr., 

Dep. Secretary of State. 


APPENDIX D. 

Office General Superintendent, 

New York, April 2 1st, 1868. 

John S. Eldridge, Esq., 

President Erie Railway Company: 

Sir : I regret to have to report a very serious accident 
to our Train 12 on the Delaware Division, between Shohola 
and Middaugh, at a point known as “ Carr's Rock," Wed- 
nesday morning last, 15th inst. 


23 


One of the trucks of the fourth coach from the rear of 
the train ran off by the breaking of a rail, and after going 
some distance, the coupling bar of the next coach ahead 
was pulled from its fastenings, when this coach went down 
the bank and pulled the three following coaches (sleeping 
coaches) after it. The coaches were all badly broken up 
and the debris of the hind one caught fire from the stove, 
resulting in burning the bodies of six of the persons who 
were killed. In all, nineteen persons were killed outright, 
and five others have since died from their injuries — making 
twenty-four deaths. About sixty others were injured — 
some slightly and some seriously, though it is hoped that 
no more deaths will result from injuries received by the 
accident. Everything possible has been done to alleviate 
the sufferings of the wounded ; and, so far, they have been 
forwarded to their homes as fast as the doctors pronounced 
them in a safe condition to undertake the journey. This 
morning there were about thirty remaining at Port Jervis. 
But one of the burned bodies remains unrecognized, and 
that, a man, was buried at Port Jervis on Sunday. 

The engineer and conductor of the train report that at 
the time of the accident they were running from twenty to 
twenty-five miles per hour, and the reports from Narrows- 
burgh and Lackawaxen, the last two telegraph officers, of 
the passing of the train, go to confirm their statement. 
The regular speed of the train by the time-table of that 
division is twenty-seven miles per hour. 

The loss by the breaking up of the coaches is estimated 
at twenty-five thousand dollars. 

In concluding this report I would call your attention to 
the noble and disinterested action of the people of Port 
Jervis, who freely opened their houses to the wounded, and 
they as well as the employes of the Company at that place 
have ever since devoted themselves with unremitting atten- 
tion to kindly nursing and supplying their various wants. 

Respectfully yours, 

H. RIDDLE, 

General SupH. 


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